This Is How Much Telcos Have To Pay For 700MHz Frequency Bands

At the end of this month, the Malaysian Communications and Multimedia Commission (MCMC) will begin to accept applications for the upcoming 700MHz frequency bands. Given that they are meant for mobile broadband service, we expect that telcos will be among the main candidates to get their hands on these bands.

Naturally, the government will not be giving these bands for free as they are considered as the country’s resources. Not only that, there are only eight blocks of frequency bands that are up for grabs which is why companies that are interested to obtain access to the 700MHz bands need to apply for it via tender process.

While that sounds rather easy and direct, all applicants need to submit a 5-years business plan that uses 2x5MHz spectrum block as basis even though they can actually apply for up to 4 blocks. There are plenty of details need to be included in the business plan including on how they are going to utilize these new bands to offer mobile broadband service at lower rate than existing prices.

Then, comes the fee part. For starters, each application must be accompanied by an RM 10 million bank guarantee which might sound a lot but it only acts as a deposit and will be returned back to applicant regardless whether their applications is successful or otherwise.

The actual fee that the government charges to successful applicants is much higher and it depends on the specific terms that they choose to use to provide the payment to the government. As stated in the document, there are four of them:

1 off payment: RM 215.535 million

5 annual payments: RM 260.595 million

10 annual payments: RM 328.380 million

15 annual payments: RM 417.120 million

Here are some examples from MCMC itself on how the fee structures above look like in real life:

On top of the fee mentioned above, there is also an annual fee of RM 18.539 million per year for each spectrum block. If our rough calculations are correct, the government will receive up to around RM 5.56 billion in total from the 700MHz spectrum allocation process.

Just like what we have mentioned earlier, it will be interesting to see (if possible) what kind of plans that the applicants especially will submit to MCMC. This is due to the fact that they not only have to convince the government to hand over the spectrum bands to them but also to recoup the amount of investment that they will have to spend to obtain these bands while still able to provide the mobile broadband service at a much lower price as required by the government.